India's Equity Market At Risk Of Major Drawdowns, Says Report

The current market valuations in the country have reached levels reminiscent of the trends observed in 2007, according to a study by wealth management platform Nuvama.

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The report claimed that elevated valuations could result in underwhelming fiveyear returns, projected to be less than 5 per cent of the Compound Annual Growth Rate (CAGR), accompanied by a heightened risk of significant drawdowns.

“At such high valuations, we can expect five-year returns to be underwhelming (< 5% CAGR) with a heightened risk of significant drawdowns. Additionally, slowing earnings growth and potential recession risks in the US labour market suggest we might be approaching an inflection point,” it added.

Highlighting the situation, it further added, “Earnings downgrade cycle has begun as profit growth is converging with anaemic top-line growth.”

This situation further points out that slowing earnings growth and potential recession risks in the US labour market suggest that the market might be approaching a critical inflexion point, the Nuvama reported.